← Most Valuable Agent with Matt Hannaford
Most Valuable Agent with Matt Hannaford
Your Signing Bonus Means NOTHING to MLB Teams — Here's What Actually Matters
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All right, everybody, welcome back to another solo episode of the Most Valuable Agent Podcast. I'm your host, Matt Hannaford, and if you have been a fan or a follower of this podcast, you know that I'm an agent of Major League Baseball players. I have been for the past 25 or 26 years and I've been blessed to work with some of the best, some hall of famers, MVPs, rookies of the year. I've worked with some first round picks. I've also worked with 10th round picks and everything in between. And what I ultimately wanted to talk to you guys about today is something that I believe to be front of mind for a lot of you guys, the listener. And I say that because a lot of people ask me specific questions as it relates to how to make a decision on does my son sign out of high school or does he go to college? Does he secure the nil piece or does he bypass that and should he sign earlier, is that better for his development? And so I wanted to touch on that today and I wanted to kind of, I guess dive a little bit deeper into that subject and, and talk about the things that all these families all you guys need to understand as it relates to this decision. Okay? And so I guess the first piece of this is what are the biggest decision points families face entering college or nil or the draft conversation? Okay, so the biggest decision points, I think the thing that most people and families think about when they think about this decision is the money. Right? And I, I don't bring that up in a judgmental way. I think it makes sense. It, money's an important piece of really a lot of decision. But I think what families ultimately do is they rely on money as the only thing that should dictate what somebody does. And I'm here to suggest to you today that it shouldn't be the only piece that you consider. It should be a piece you consider, just not the only one. So let's, let's talk about that a little bit. Okay? So first thing is, I don't think that whether or not you sign or go to college, that that decision should be left to the very last second in order to be made. The way that this process works, if you're going through this and you are going to have this decision to be made, the truth of the matter is, is there are various people that are involved throughout this journey, right? You're obviously going to have your parents. If you're the player, you're going to have an advisor, potentially you're going to have professional scouts, you're going to have college recruiting coordinators, and everybody's going to be communicating and, and what ultimately is happening in that last year leading up to this decision being made, the draft is the player you. You're performing, right? You're going to have to go out there and show everybody what you're capable of. And that whole year what's going on is all these scouts, everybody's evaluating you and they're really trying to figure out what is your potential upside down, what's your projectability, meaning where could you develop into in a couple years and what is that ultimately worth? And these professional organizations, they're trying to. They're trying to make as safe a decision as they possibly can as it relates to you. So what they'll do oftentimes is they'll try to think about a player who's gone through this before, somebody who's been drafted before, and who do you remind them of? And maybe if they can find a particular player that you move like and somebody who you have the same skills of, they may put that. They call it a comp, a comparable. They may put that kind of comp on you, right? Oh, this guy reminds me of so and so player. Now, obviously, the better that player is, the better for you, right? Maybe that, that helps you command a certain dollar value out of the draft. Maybe, maybe it doesn't. But regardless, this is what these scouts are doing. So as that the spring senior season goes on, the college that you're committed to, what they're identifying and try to figure out is kind of the same thing, is where do you fit in the draft? Are you going to be somebody who's going to be drafted really high? Because if you're going to be drafted really high to them, they may be concerned and feel like, oh, no, if he's going to be drafted really high, then we may need to go out and get another player who could play that same position, right? So they're trying to ultimately protect their school. And so as this journey and as these. The senior season kind of unfolds, what you need to start to do is you really need to start thinking about the decision that is coming, right? Am I somebody who's, let's just say, mature enough to sign a professional contract out of high school? And if the answer to that is yes, okay, great, then what are the other things that start to come into play? Well, if I'm blessed to be mature enough to sign a professional contract out of high school, what for me ultimately should dictate whether or not I do. Now that changes from guy to guy. Not every player should consider the same things. Okay, so some of the things that players weigh, it's what is school mean to me? Am I somebody who knows I definitely going to get a college education no matter what, Whether that's before I signed a professional contract, during or after I sign a professional contract, like getting clear on who you are relative to your education, I think is extremely valuable and important. It doesn't mean that you have to go to college first. You just want to get clear kind of unemotionally on what you want to do. Okay? So that is an important thing that you need to consider and think about. Above and beyond that, let's now talk about the money piece because that again is probably the biggest thing that people think about and consider when making this decision. When you think about college and, and nil, what I want you to think about is the, the college that you're committed to. Okay? If, if they're going to make you an offer, that offer, the first time it comes, comes to fruition or the first time they make the offer, it's probably the fall of your senior high school season, right? So they're telling you the amount of money in the fall. But what I don't want you to do is assume that that amount of money can't change because if you're somebody who's going through his senior season and now you're somebody who's considered a first round pick, that school ultimately knows if they don't offer you a decent amount of money, then it only increases the likelihood that you don't go to college and you instead sign out of the, out of high school to the draft. So if the school is going to really put their best foot forward, they're going to have to offer you some amount of money that's going to entice you enough, right? That typically comes right before the draft. Okay? So as you go through this journey, in this process, I want you to know, look, if I'm good enough and I show that I'm a guy that's going to be drafted high enough, I know that the school is going to put their best foot forward and they're going to do what they can to make sure that I end up on campus. And so again, going through that, that senior season, you're thinking about the maturity that you have. You're trusting that your performance is going to dictate, you know, on some level where you go in the draft. And the performance also is going to dictate the amount of money that college offers me. Now let's talk about what the money represents. Okay? What the money represents out of the draft for a professional player is opportunity. Okay? If you're a player who signs for $100,000 as an example, I don't want to say, or just, you know, be short sighted and say that that is not a decent amount of money because to some people that is a tremendous amount of money. But I want you to think about it for the standpoint of what is that amount of money mean to a major league baseball team? $100,000 to a major league baseball team isn't that much money. They can walk away from that amount of money very easily. And what that looks like is you may sign your professional contract out of high school for $100,000 and let's assume you're a position player and they send you to the lowest level and you're playing a couple times a week. And the reason you're only playing a couple times a week is because you only signed for $100,000 and they're waiting to see if you're going to develop and you're not playing as well as maybe you could. Now, for you, the argument may be, well, I'm not really given enough opportunity to show what I'm capable of. But to the team they're saying, well, you're not playing enough because you're not showing us that you deserve to play more, Right? So to that organization, when is the time where they may say, you know what, we have to now give these at bats to another player. You're not showing enough. The smaller the signing bonus, the more likely it is that that opportunity doesn't develop as quickly as you'd hope and they walk away from that agreement with you a lot sooner. Okay? So that is something to be mindful of. Now the question becomes is, well, how do I determine what amount of money we should consider or sign for? Like what is a decent amount of money? And I'm here to tell you there is no science to that. It's not an exact science. You can't just say, oh, this is the amount of money for everybody. You know, you can make the argument that like a million dollars is a reasonable amount of money for the team to not want to walk away from. But to some players, I would say you should never sign for a million, you should sign for 5 million. Again, it just depends on the skill set of your son. And if you're the player, the skill set of you now what does the money represent in college? So in college, what I want you to understand is similar to professional baseball, they're trying to place a dollar value on what you mean to them, okay? So the better that you are as a player, the more likely there is more money for you in college. Now, in college, something that you need to understand, and this is all relatively new, so I don't expect that you're an expert on this yet, but there's really two things that are in play in these college agreements. You have the revenue share piece and then you have nil. Okay? Now both are an element of nil. But when you hear revenue share, what I want you to think about is, okay, this is going to sound confusing. It's not a paycheck, but it's like a paycheck in which you're receiving a set number of money, set amount of money, every single month for a period of, we'll call it 11 months. Okay? Now there is an agreement in place that you have to sign in exchange for that amount of money. And that agreement, it's called a revenue share agreement and it will stipulate a various amount of things that will tell you what you can and cannot do. But also, if you walk away, what happens, the recourse, etc. That revenue share agreement is extremely important. You're going to want to make sure that you, or you at least have a lawyer that reviews it. You're going to want to make sure that you completely understand what that agreement says. Okay? Now in addition to the revenue share agreement, there is also nil. Nil. I want you to think about. It's more like a marketing deal, right? So let's just say Delta Airlines offers you a certain amount of money to make an appearance. And in exchange, you're going to sign some autographs, you're going to take pictures, you're going to sign some jerseys and they're going to pay you in exchange for that. That is nil. Okay? So you're going to have two various things in these college agreements. Rev, share and nil. Okay? All of that is negotiable. So just like a signing bonus or a draft contract, the more leverage you have, meaning the better you are as a player, the more negotiating power you have. So this is where you want to rely on your agent to kind of guide you through that stuff. But on a high level, I wanted to kind of leave you knowing that. Okay, now next question. What does a typical first year professional contract include? Okay, there are various things that a first year professional contract Includes the first of which is the thing everybody wants to talk about, which is the signing bonus. Okay? The signing bonus. Now it is an amount of money that depending on how big it is, will be split up into two payments. Okay? If and it's not a guarantee that it's split up into two payments. The reason I say it depends on how big it is. There are some teams that, you know, you know, if it's a couple hundred thousand dollars, they won't split it up into two payments. The reason a bonus would be split up though is for tax purposes. Okay? So I want you to think about it from the standpoint of if you're a California resident, right. And you're a high school senior and you live in California, it would be advantageous for you to put the least amount of money in the first payment as you possibly can. Okay? Now the first payment will be paid out anywhere from 30, 60 to 90 days after it is agreed to. And then the second piece is paid out after the first of the next year. So every team does it differently. Sometimes it's in January, but usually it's January to April. That's kind of the window of the following year. And so a reason again why you would want maybe more in the second payment is if you're in the high tax state in the first payment, but maybe a tax free state in the second or vice versa. If you're in a tax free state in the first payment, then you want that amount of money to be as high as possible and then in the second payment as low as possible. Now I will say it's not as if the teams will give you 10% of the check in the first amount and 90 in the second. It's pretty close to 50, 50. But regardless, you're going to want to talk to a tax professional well in advance of that so that you have a complete understanding on how that works. So in addition to the sign bonus, something that I want you to understand is there is a period of years that this draft agreement covers. Okay? So for a high school player, that's seven seasons, okay? That does not mean that you have to stay in or in the minor leagues for those seven years. You could graduate to the major leagues in the first couple years. It, it ultimately your performance is going to dictate what happens. You could be released from, from the draft contract before the seven year period, but if you stay in the minor leagues for the seven years, once you get through that point, then you're a minor league free agent. Okay? So it covers seven Seasons. In addition to that, you're going to have a component of the draft contract which is the college scholarship plan. Okay? Now the college scholarship plan, it is negotiable. So if you are a player who, let's just say is committed to Vanderbilt, okay, and you're from Nevada, that amount of money, you, you have to know what that amount of money is to go to school at Vanderbilt. You're going to want to have that ready because the organization that you're drafted by, they may try to make the claim. Look, you know, you're from Nevada, you were clearly going to Vanderbilt not for school, but to play for the baseball team. So instead of us paying you, the Vanderbilt scholarship will give you the state tuition in Nevada, which is, as you know, drastically different. And so you want to do your research in advance. And just so you guys know, you can go to pretty much any school's website and find these figures, but you're going to want to find the, the tuition portion and then you're going to want to find the room and board portion. Now assume for a second your son signs a professional contract out of high school and he gets the college scholarship paid for. Keep in mind the chances that he's going to take that money and spend it on college right away is rare. It's going to be at some point into the future. So you're going to want to account for inflation, meaning you're going to want to bring that up and add in kind of like a barrier or an additional amount of money in addition to what you see online. So as an example, and I'm just using round numbers, let's just say one year at Vanderbilt's $100,000, right? You're going to want to add an additional piece to $100,000 for inflation so that in 10 years when he goes and he takes that school, it's covered. Okay? The other piece is you're going to want to familiarize yourself with how much time does your son have to actually go back to school, okay? That's something that you're going to want to be aware of. In addition to the college scholarship plan, there's something called an incentive bonus plan. Now the incentive bonus plan is a bonus that is paid out in three different stages, okay? So after 90 consecutive days at double A, there's a thousand dollar bonus. After ninety consecutive days at aaa, there's a fifteen hundred dollar bonus. And after ninety consecutive days in the big leagues, there is a five thousand dollars bonus. Okay? Now that bonus gets deducted from the college scholarship plan. So it's not as though that money is coming out of the team to you. And you know, you still have the same amount of money coming out of this college scholarship plan. It does get deducted from the college scholarship plan. So make sure that you talk to your advisor about whether you should or should not do that. And then lastly, the other thing that I'm going to touch on is a, what I'm going to call kind of like a clawback clause. And what I mean by that is there's a set time frame that if your son or you, if you're the player retires after signing the professional contract, that the, the organization has the ability to claw back that money. Okay, so what that looks like is, let's just say you spent two years in professional baseball if you're the player and maybe just, you know, the love of the game is gone and you want to move on and start your life and so you retire. Make sure that you understand whether or not that clawback provision exists, because if it does, that major league organization could actually claw back some of that money. So you don't want to be surprised by that. So that is something that you want to be aware of. Okay. All right, next question. So what question? What questions rather should families ask any adviser or representative? So the first thing that comes to mind is really, you want to have a, a pretty clear view of kind of how things are going. Like a status report, right? Like, you know, if everything is considered equal right now, you know, where, where does my advisor think I'm going to go in the draft? Now I want to caution you with that question because most families and players, they want the answer to that as soon as possible, right? And they think that it's as easy as to say, oh, right now you're a fifth round pick, right? It's not quite like that. Every team has a different opinion of you. But also it's a moving target, right? A player has an ability to increase his draft stock. So the better performance, the more likely is that he's going to get drafted. Higher, right? The, the, you know, the better the skill set of the player. So don't think that if it's January and everybody's like, oh, you're a top five rounder, that that means that you can't change either positively or negatively up until the draft, that, that, that scouting report can change and it will change. So I don't say this to say that an agent or an advisor should be letting a player know every single day. This is where you Stand. However, I bring it up because I think it's important that a player at least has some general sense of how things look. And the reason I say that's important is because part of an agent's job is we have to ultimately kind of control the expectation. Right? If an expectation for a player of high school is that the player is going to be a first round pick and there is zero chance that that player is going to be a first round pick, and it's more likely that that player is going to be a 20th round pick and you as an advisor or you as a player don't ultimately know the truth. You're going to get up until draft day and you may be thinking something that is definitely not going to happen. And so naturally, how could you prepare for that moment if you're not being kind of guided properly through that? And so that is the reason why I bring up this, this notion of like, where do I stand kind of in the industry's eyes now, as, as you get closer to the draft, that obviously is going to change and it's going to grow and it's going to adapt and it's going to go one way or the other, either positively or negatively. But that is something that will continue to be refined up until the draft. So that is one piece that I think makes sense for you to ask is really just generally kind of, how do things stand as we sit here today? Okay. The other thing that I think is important is as a player, you should ultimately know, and I'm not, I'm not suggesting this to share with anybody, but you should ultimately know what way am I leaning. Right. If everything is considered equal. Right. Would I prefer to sign out of high school or would I rather go to college? I don't think it is smart for any player to kind of punt this topic off into the future and not think about hoping for the best. I think it's better that unemotionally you analyze that decision really clearly and you leave space for things changing. But it's important that you know what way you're leaning. And the reason I say that is it's important that you speak to your advisor about how you feel and give him an opportunity to guide you through that. Don't, don't not ask the question of yourself because you're afraid of the answer. All that is going to do is it's going to put you right before the draft now, having to deal with reality and yet you haven't really dealt with it yet. It's not the smartest thing to do. And so that's something that I do think makes sense for you to kind of speak to your advisor about. Okay, how should families balance short term money versus long term career development? Look, I think that is something that is unique and different to everybody. Right? Everybody has different financial needs, everybody has different skill sets and development plans. I do think it's important for a player for you to understand the development plan for you if you go to college and you compare that to the development plan for you at a pro ball. You know, here's the reality. There are organizations in Major League Baseball who, they're professional teams and they maybe don't do the best at developing hitters or pitchers related to other teams. You know, some teams are great at developing pitchers, others not so much, is essentially the message that I'm trying to convey. And so as a player, it's important that you get clear with that. Now, the hard part about the draft is you don't oftentimes have a ton of time to think about what organization you're going to sign with. Right. Oftentimes a team is going to call and they're going to present a certain bonus structure and you're pretty much met with do you want to sign or do you not? And you have to make a split second decision. And so you don't know if that decision or that question is going to come from a team who maybe just won the World Series or one that just finished last in their division. Right. And so you want to get clear on that stuff in advance. Right. But you also want to understand what is the plan if I end up going to college. Now, that one is a little bit easier because there's one school that you're committed to and you can speak to that school about that plan well in advance of the draft. And I would encourage you to do that. The only hard part there is, well, yeah, you don't know if that college coach is still going to be there. Maybe there's a coaching change. Maybe a coach that was the recruiting coordinator, that really was the glue behind you committing to that college, maybe he's taken a head coach job somewhere else. Those, those examples certainly exist and those things happen. But regardless, I think it's important that you go through that, that mental exercise in advance. So the clarity comes with just the dissection of it. All right. Just thinking about it, I. The exercise that I oftentimes put players through is I ask them repe. And I have them write down, you know, over and over and over leading up to the draft. If this is the amount of money that you're being offered in the draft, what is your decision and why? Right. It's. It's just familiarizing yourself with what I would say are, are, you know, kind of traps that I think we as people put ourselves in by faulty thinking. I think, you know, oftentimes we lie to ourselves, right? Oh, no, I don't think this way. When in reality we do. And so the more we can be methodical through the process, the better off I think you're ultimately going to be going through it. Next question. How do development timelines factor into early career contract decisions? So, yeah, I mean, here's the reality of that. You know, development timelines, if you're a mature player who's already developed and let's just say can't benefit by going to college because you're already more advanced than that, then, yeah, I mean, I think that should go into whether or not you find pro ball more appealing. But the reverse is also true. If mentally, right, if, if emotionally you're not mature enough for pro ball, then I would caution you from signing and going to play pro ball. No matter the amount of money, you're going to have one opportunity and one chance at this. And unfortunately, if you sign a pro contract before you're ready emotionally and you're thrust into the limelight and make a mistake, you know, sometimes guys cost themselves their careers. You know, you can't go back to college after you've played pro ball and go play college baseball. Like, that's not happening. And so you want to make sure that in advance of that decision, all these things are thought through. And there is no better person to do this with you than your advisor. That's what you're hiring him for. And so you want to make sure that you pick his brain. You ask him all these various things. You know, it's. It's. It's a complex thing. It's something that is truly unique and different for you. And so the, the answers that he gives shouldn't be the answers that he gives every player. The answers that he gives should be specific to you and your needs and your desires. And I would make sure that if I was you. So, um, as a summary, look, I mean, your advisor, there's a reason why he plays an important role, right? He's guiding you through all this stuff, and if you don't feel like he's actually doing that, then you need to have maybe some more difficult conversations. Um, but I guess the thing that I want to. I guess leave you guys with is don't wait until draft day to really think about what you're going to do. Start analyzing, overanalyzing all of that stuff well in advance so that when that decision comes, you can make it in a split decision. You can make it in two seconds and you know that you feel good about it. You know where the breaking point is. You know how you came up with your figure. You know what college is worth to you. And it's an easy decision. If you don't feel that way, it doesn't mean that it's not going to be stressful because again, this is a dream of yours and it may come to fruition. But I, I, I want to encourage you to think about, no matter what it is, whether it's you going to sign a, you know, to go to college or whether you're going to sign a pro contract, both are great opportunities. And you and you alone are going to dictate whether that path is the right one for yourself, nobody else. Okay? So I hope this episode was valuable for you. Like always. If you have any questions, DM me, send me messages. I would love to hear from you guys. And obviously if this helped you, please share it with another family. Spreading the word certainly helps us here at the Most Viable Agent podcast. And until next time, keep doing your thing, man. I'm here for you. Talk soon. Thanks for joining. Sa.